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Safeguard customers’ personal information; regulators are watching

NEW YORK, Sept. 19, 2014 (Thomson Reuters Accelus) – In a sanction that can serve as a wake-up to the financial industry, Verizon Communications last week agreed to pay $7.4 million to end an investigation that found it failed to tell two million new customers about their privacy rights before using their information for marketing purposes, the Federal Communications Commission said.

Safeguard customers’ personal information; regulators are watching

The privacy probe highlights the vigilance that must be paid to consumer privacy rights to meet regulators’ requirements. Although the financial industry mostly answers to different regulators, it too is subject to laws and regulations protecting the privacy of its customers.The FCC said its investigation found that these phone customers, starting in 2006, did not receive proper privacy notices in their first bills. The notices would have told consumers how to opt out of having their personal information used to tailor marketing offers, which the company later sent to them. Compounding the lapse, the FCC learned, Verizon failed to discover these problems until September 2012 and failed to notify the FCC of these problems until January 18, 2013 — 126 days later.

Safeguard customers’ personal information; regulators are watching

The FCC noted in its order and consent decree with the company that Verizon must take significant steps to improve how it protects the privacy rights of its customers.Those privacy-protection actions include:

Inserting opt-out notices on every bill it sends customers, not just the first bill.

Creating systems that can monitor and test the company’s billing systems and opt-out notice processes to ensure customers are receiving proper notices of their privacy rights.

Reporting within five business days to the FCC any problems that are detected in these systems that are not an anomaly, plus any instances of noncompliance.

Verizon’s spokesman, Ed McFadden, noted that Verizon’s settlement with the FCC did not involve a data breach or unauthorized disclosure of customer information to third parties. Rather, some Verizon customers got marketing materials from the company about other Verizon services.

Safeguard customers’ personal information; regulators are watching

The Gramm-Leach-Bliley Act requires financial institutions — companies that offer consumers financial products or services like loans, financial or investment advice, or insurance — to explain their information-sharing practices to their customers and to safeguard sensitive data.

As part of its implementation of the GLB Act, the Federal Trade Commission (FTC) issued the Safeguards Rule, which requires financial institutions under FTC jurisdiction to have measures in place to keep customer information secure.